What's next for Tribune, Sun-Times in burb paper deal

If Tribune Publishing snaps up the Sun-Times' suburban papers, how does the Sun-Times fend for itself?

Tribune Publishing Co. and Wrapports LLC, owner of Sun-Times Media, are nearing an agreement under which Tribune would buy the Sun-Times' suburban titles — a move that would leave the Chicago Sun-Times on its own under the parent, according to sources familiar with the talks.

A sale of its suburban titles would leave Chicago-based Wrapports, the company formed by Michael Ferro to buy Sun-Times Media in 2011, as the owner of the flagship Chicago Sun-Times, the Chicago Reader and a potpourri of other enterprises, such as High School Cube, the video company that broadcasts school games in cities across the country.

A suburb-free portfolio may ultimately stack the odds against the survival of the Chicago Sun-Times. Although the money-losing newspaper may benefit as part of the deal by signing a new, lower-priced printing and distribution contract with Tribune Publishing, losing the advertising revenue that is provided by its 40-odd healthier suburban weeklies and dailies will pose a financial challenge for the Sun-Times mothership.

“This decision puts Chicago on the road to becoming a one-newspaper town over time,” said Ken Doctor, a media industry consultant based in Burlingame, California.

Sources previously told Crain's that the companies were talking about working more closely together in some fashion as they attempted to renegotiate printing and distribution agreements that are costing Wrapports an exorbitant $70 million annually.

DIGITAL FUTURE

The Chicago Newspaper Guild, the union that represents a whittled-down workers' group of 75 editorial staffers at the Sun-Times papers, told members in a note today that a sale of the suburban papers is being considered. The union is meeting with Sun-Times management tomorrow to discuss more details. “I believe if a sale takes place, there would be a smooth transition and our various suburban contracts would be honored, but meanwhile myself and your executive board will remain vigilant during this process due to the obstacles we've had to overcome in the past,” David Pollard, president of the union, said in the note to members.

The Chicago Sun-Times could follow through on Mr. Ferro's pledge of a “digital” future by making the paper into what its front page already proclaims is “ChicagoSunTimes.com,” no paper needed, but it would still be difficult to make ends meet financially, Mr. Doctor said. A digital-only product would require significantly paring the newspaper staff to reduce costs to a level that could be supported by all-digital subscriber and advertising income, he said.

“You would still have to have major cuts in a newsroom to get to all digital, and then you wouldn't be a major presence in the Chicago area,” Mr. Doctor said.

The best hope might be if Wrapports investors, including wealthy Chicagoans such as Morningstar Inc. CEO and billionaire Joe Mansueto, decide to keep plowing more money in the Chicago Sun-Times despite its financial condition. But some of the investors have indicated that that's not likely after pledging $80 million already. About three-quarters of that amount has already been spent, one source said. Of course, Wrapports would get a one-time cash infusion from the sale of the suburban papers.

WORKING TOGETHER?

Tribune Publishing and Wrapports also discussed in recent months the possibility of finding a way to more closely merge the two city papers' operations. Tribune Publishing provides printing and distribution services for all the Sun-Times papers, but the papers could decide to cooperate even more closely if they were to merge sales, marketing or back-office functions. Still, that option of merging more operations has been cast aside for now, according to sources.

As the Chicago Sun-Times goes it alone under its Wrapports parent umbrella, Mr. Ferro and his team, including CEO Tim Knight, are promising to keep charging ahead with its digital play, across a mix of industries. The company declined to comment on the possible deal, first reported by Chicago blogger Robert Feder, who also has a licensing agreement with the Chicago Tribune.

Mr. Knight said the same thing in a memo to Wrapports employees: “We don't comment on rumors, but I want to assure you that everything we do is to strengthen the company.”

Still, he encouraged them to keep working hard as the company enters its busy fourth quarter and suggested the corporate strategy hadn't changed.

“At present, our parent, Wrapports, LLC, is evaluating a variety of investments to continue to execute our digital strategy and grow the Chicago Sun-Times, one of the country's great newspapers,” Mr. Knight said in the memo to employees today.

TRIB'S SUBURBAN STRATEGY

Tribune Publishing also wouldn't comment on the possibility of buying the newspapers, but the company's new CEO, Jack Griffin, has said that his corporate strategy includes buying up newspaper properties around his eight major metropolitan newspapers. He's already pursued that tack in other places, including in Maryland communities around the company's Baltimore Sun, so it's natural that he would make a move to do that in Chicago, too.

If Tribune didn't make a move sooner rather than later in Chicago, another paper might. Just last year, Shaw Media purchased the Joliet Herald-News from the Sun-Times for about $6 million. While terms of the purchase were withheld, one industry insider estimated the Joliet paper sold for $7 million to $8 million, based on annual earnings of about $2 million before taxes and other expenses. That person, who asked not to be identified, said the Joliet newspaper was probably the most profitable in the chain.

Tribune Publishing got $50 million in the company's recent spinoff from its former Tribune Co. parent, but it is still making money and has the leeway to invest that capital into purchases.

“It's part of Jack Griffin's plan to own the markets that the Tribune is currently in,” Mr. Doctor said.